Bankruptcy filing

South Arkansas Youth Services has filed for bankruptcy.

South Arkansas Youth Services has filed for Chapter 7 status with the U.S. Bankruptcy Court in the Western District of Arkansas.

A Chapter 7 bankruptcy filing is usually a prelude to the liquidation of assets to satisfy creditors, while protecting the filer from further legal action by creditors.

South Arkansas Youth Services is a private, non-profit corporation created in 1977 by a group of Magnolia citizens to provide emergency services for young people. The center on County Road 11 was authorized to receive young people ordered by judges from across the state to receive treatment and services.

SAYS recently notified counties in the region that it would not accept new cases.

SAYS owns the Magnolia facility and had contracts to operate similar facilities in Dermott, Mansfield and Lewisville. But in 2016, the state Division of Youth Services took over the operation of those facilities and three others operated by a different non-profit agency.

Troubles at SAYS became public last fall when former employees – husband and wife Aric Shane Knight and Jennifer A. Knight – were charged with criminal offenses relating to a years’ long pattern of financial malfeasance involving the agency.

Jennifer Knight was employed as SAYS chief financial officer, and Aric Knight was an information technology expert and computer technician. Jennifer Knight is the daughter of Jerry Walsh, who was the long-time executive director of SAYS until his retirement last April. Walsh is not charged with any crime.

In November, former South Arkansas Youth Services employee Mary C. Snider sued SAYS in Columbia County Circuit Court. She claimed that she was wrongfully terminated and that Walsh, her former boss, acted in “extreme and outrageous” ways against her – in part because of an investigation into the operations of SAYS.

The brief six-page bankruptcy petition says that there will be funds available for distribution to unsecured credits, but it doesn’t say how much.

A series of checked boxes on the filing indicates that SAYS has between 50 and 99 creditors, between $1 million and $10 million in assets, and between $100,000 and $500,000 in liabilities.

The filing includes a resolution approved by the South Arkansas Youth Services Board of Directors. The resolution approves of the bankruptcy filing. Board President Robert Burns and SAYS Director of Accounting Whitney Peterson are authorized to do all things necessary to file the bankruptcy petition, and to act on the board’s behalf in carrying out the filing.

A meeting of creditors will be held at 10:30 a.m. March 7 at the U.S. Courthouse in El Dorado. Renee S. Williams of Hot Springs has been assigned by the court as the bankruptcy trustee. The law firm of Wright, Lindsey & Jennings LLP is representing SAYS.

People or businesses owed money by SAYS have a deadline of March 29 to file claims secured by a security interest.

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